The End of an Era?

By Susan Bloom

Earlier this month, the lighting industry received a bombshell piece of news with the announcement that GE Lighting—an over century-old company whose lineage traces back to Thomas Edison's groundbreaking innovations in the field of lighting—was officially up for sale.  The sale, which will reportedly exclude the company's 'Current' lighting division (a provider of digital solutions for the commercial/industrial segment), is still in early stages and a buyer has yet to be identified.

While the market for conventional lighting technology has experienced a serial decline over the past 10+ years and a recent Wall Street Journal article reported that GE's lighting business made up less than 2 percent of GE's total revenue in 2016, the impending sale of GE Lighting nonetheless marks a bittersweet milestone in an industry long-dominated by the powerhouse brand.  Following, tED magazine tapped Jawahar ('J') Hingorani, London-based Equity Research Analyst with Bloomberg Intelligence and a specialist in the electrical equipment industry, to share insights on the current state of the lighting industry and what the sale of GE Lighting could mean to fellow lighting manufacturers and associated channel members.

tED magazine: Did GE Lighting's announcement come as a surprise?
Hingorani: Rumors surrounding the possibility of GE Lighting exiting the bulbs business had actually been circulating for months, especially after publication of an April 2017 Fortune Magazine article on the subject, which hinted at the irony of the company divesting of the very division on which it was founded over 125 years ago.  However, GE Lighting had become viewed as the #3 player in its industry, so the pursuit of a new owner for its bulbs business probably comes as no surprise and was just a matter of time.

tED magazine: Describe the current landscape of the lighting industry and the need for/decision by certain players like GE Lighting to exit.
Hingorani: Lighting is an extremely competitive industry and one in which technology has changed rapidly.  Conventional lighting technology is quickly being replaced by LEDs and those manufacturers who have remained in the conventional bulbs business have faced a declining-volume market which has rendered absorption of their overhead increasingly challenging.  In addition to improvements in LED performance over time, a wealth of LED competitors, especially from Asia and offshore, have flooded the industry, which has helped to drive a 75 percent reduction in LED bulb prices since 2012 and greatly increased consumer accessibility to this technology.  Recognizing these converging trends, Osram carved out its lamps business, now called LEDVANCE, and completed the sale of that division to a Chinese consortium earlier this year.  Most companies understand that the conventional lamps business no longer represents a viable long-term strategy and are increasingly reorganizing to become more solutions-based providers.

tED magazine: What does the new lighting landscape look like?
Hingorani: I think that lighting companies will fall into one or more of the following categories:  bulb/fixture-based businesses, LED and component-based businesses (such as semiconductors/chips), automotive lighting businesses, and specialty lighting businesses driving LiFi and/or lighting technology that's ultimately used to direct and track purchase behavior and enable automation, data analytics, and operations management.  LED lighting upgrades in commercial, industrial, and retail facilities where building automation overlaps with lighting represent a huge opportunity and a true solutions-based approach for providers and channel members.  GE's Current division plays right into the energy-efficient, digital, wireless control product offering that's becoming increasingly popular in buildings today.

tED magazine: Are certain lighting companies better positioned to capitalize on the sale of GE Lighting? Who might buy GE Lighting?
Hingorani:  Since the bulbs business is a declining volume and margin market, the sale of GE Lighting shouldn't impact any of the other big players, who are already digital, so this is more of a GE event.  It's not clear what kind of company will be impacted by a legacy bulb business, but there's a global marketplace where not everything has gone LED yet and where a buyer could benefit from inheriting a well-known brand.  While it's not yet clear who might buy GE Lighting, they'll need to scale their costs to remain competitive and serve that business in the best way.

tED magazine: Any advice for electrical distributors who buy from/sell GE Lighting products in terms of their upcoming strategy?
Hingorani: We have no real advice for distributors, except that one would expect that there would be communication with stakeholders following the announcement of and transition to a new owner, and that this would hopefully be handled in the most professional and seamless way possible.

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Bloom is a 25-year veteran of the lighting and electrical products industry. Reach her at susan.bloom.chester@gmail.com.